City pensioners get '13th check' bonus

More than $6.1 million has been distributed to retired San Diego city employees in the form of a “13th check” — beyond their usual 12 monthly payments — making this year’s holiday bonus the largest such payout in the history of the three-decade-old practice.

A review of pension data found that retirees have received $95.8 million in such bonus checks since 1984. This year, more than 8,800 eligible recipients, also a record high, received a check that averaged $698 per person.

Give it out every year 16% (226)

Give it out during boom investment years only 8% (109)

Give it in boom years only, and only to retirees from before city pension boosts in 1996 10% (134)

Never give it out 67% (941)

1410 total votes.

The “13th check” program was launched in 1980, when pension fund investments were doing well and city retirees had struggled through years of inflation.

But it’s become a source of conflict as the city’s pension system faces a $2 billion shortfall in promised payments, which remains a taxpayer burden and has led to budget crises in the past at City Hall.

Shortly after its inception, the policy resulted in bonus checks that were higher than some recipients’ benefits over the course of an entire year, according to a city Pension Reform Committee in 2004. City officials later scrambled to limit how much each person could receive, which resulted in a legal battle and subsequent settlement of nearly $10 million.

The settlement nixed the 13th check — and several other costly benefits — for workers hired after June 30, 2005, but the total cost has continued to climb in recent years, as more people hired before that date retire and live longer.

According to pension data, the number of people receiving the 13th check has increased by more than 33 percent since 2010, and the pension system could end up distributing an additional $100 million to $150 million over the next few decades before the program begins to phase out.

“Why didn’t we use that money to hire more firefighters or policemen?” asked resident Marc Skora of Mission Valley, who has been moved to write letters to the editor about the program in the past. “As a taxpayer, I’m not against government wages, I’m against government waste.”

District 6 City Councilman Chris Cate said city leaders were not looking after the taxpayers when they implemented the policy, which future leaders had to scale back.

“These were all liabilities that would increase exponentially that we had to get a grasp on,” he said.

Cate said the cap, in addition to other reforms implemented in recent years, will help reduce the city’s pension bill each month, but there isn’t much else city leaders can do.

The check is considered a vested benefit, which retirees were promised, and therefore legally entitled to receive.

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“Until there are no longer any more retirees who are eligible for the benefit, the city’s going to have to pay for it,” said Cate, who previously served as vice president of the San Diego County Taxpayers Association.

Advocates said the bonus helps many who are struggling to make ends meet. According to data from Transparent California, four of the five retirees who received the largest checks this year had annual pensions of less than $20,000 in 2014.

“Most the of the retirees get about $3,500 a month,” said Jim Baross, president of the San Diego Retired Employees Association. “So this 13th check is something that people really look forward to as a supplement to what they're regularly getting and it doesn’t come every year.”

On the other end of the spectrum, several pensioners make $300,000 or more in pensions, and dozens make $100,000-plus.

According to Jessica Packard, communications manager for the San Diego City Employees’ Retirement System, the payments are made only when pension fund investments meet certain earnings thresholds compared to agency expenses. Checks have gone out every year since 1984 except for 2003, 2009 and 2012.

This year the system said it had realized investment earnings of $301 million with $154.3 million in budgeted and operating costs. A balance between the two of $146.6 million was large enough to trigger the payment.

For those members who retired sometime after June 30, 1985, the formula is $30 times the years of service. So for a person retiring in 2000 after 30 years with the city, the 13th check would amount to $900. The 13th check is richer for workers who retired earlier — with less generous pension benefits — and goes up to $75 per year of service.

Cate said pension reforms in recent years will help to reduce liabilities, which will allow the city to reduce the deficit and “spend the money on repaving streets, opening libraries, building new fire stations, all things that our residents rely on.”

The 13th check is a tradition at many public pension systems across the nation, but not at the San Diego County Employees Retirement Association, which administers pensions for retired county employees.